Dallas, TX

The Median Household Income In Dallas Isn't Enough to Buy You a Home in Dallas

Amanda Garland

With the housing market booming, the dream of owning a home is being put on ice for many buyers.

Homebuying these days looks something like the following scenario.

The house opens for viewing on Monday. You do a walkthrough Monday morning. You don't love the house, it needs a paint job, the living room is too small, and the backyard looks out on the highway. But it is within your budget, so you put in an offer 5 minutes after you leave, offering $5k more than the asking price.

The house closes for showings on Tuesday because the seller has already gotten 17 offers. They end up turning your offer down for someone willing to pay $15k over the asking price.

And this is an optimistic scenario. Many homes are being sold sight unseen for thousands of dollars over the asking price. If you are not offering more than the asking price or paying in cash, you are unlikely to get the house.

This battle royale style of house buying is pricing many buyers out of the market. But just how bad has it gotten in the Dallas area?

Dallas Home Pricing Stats

The average sales price of a home in Dallas, as of September 2021, is $434,910. That is no small figure.

This is an increase of 18.99% when compared to last year. One possible reason for this drastic change? The number of house listings declined by 34.7%

It is important to note that this figure is the actual "sales" price. Not the listing price, and not the home's value.

As of October, the median listing price according to Realtor.com was $419,000. That tells us that the average home is selling for well over the listing price.

Now, compare that to the average home value in Dallas which is just over $280,000 according to Zillow.

This number is usually a good starting point when you are house hunting. It gives you an estimated mortgage and savings goal.

But right now, this number is actually misleading to buyers. This is because this value is based on appraisals for homes that for the most part are not on the market. These are homes that are not sale-ready and may not have been reappraised in several years.

So when homebuyers start with this number, they may get hit with sticker shock and find that their current savings are woefully short.

Dallas Household Income Stats

Qualifying for a mortgage is dependent on your income and debt. So what does the income look like in the Dallas area?

The median household income in Dallas currently sits at $52,580 which is slightly below the national average of $62,843. So income in the Dallas area is not that great.

Now let's take a look at debt. Here we have to go a little broader and look at the whole state of Texas. The average debt amount each household is carrying according to Self Financial is $45,920 which is actually several thousand lower than the national average. Thankfully debt isn't a huge problem.

Furthermore, Texas is in the middle of the pack when it comes to average credit scores. We are 26th in the nation at a 680 average credit score. This is an important factor to consider because it influences the kind of mortgage rate you qualify for which in turn impacts how much home you can afford.

Income Versus Home Prices

So, how do these income numbers compare to the cost of the average Dallas home?

Most experts recommend spending no more than 28 percent of your income on a monthly mortgage payment with a total debt payment amount of no more than 36% of your income. So with an income of $52,580, you're looking at a max mortgage payment of roughly $1227 a month.

Using this calculator, let's take it one step further.

Entering in the median household income, factoring in a monthly debt repayment estimate of $750 (the $45,920 at a 5% interest rate paid off over 6 years), setting the credit score to average (630-689), and opting to put a full 20% down on the home, we come up with a suggested maximum home price of $126,512. That might be enough for a 2 bed 2 bath condo.

If we play with the numbers a bit and drop our monthly debt payment down to $350 and go aggressive with our debt to income ratio risk, the average Dallas household can afford a home price of up to $312,543 but only if they can fork over a full $70k downpayment!

And this still leaves us $100k plus short of the average home price in Dallas.

What Can We Do?

Like many cities, Dallas struggles with housing demand. We have more people in the metroplex than we have houses. We also have an influx of investors who are snapping up homes and turning them into rentals.

The good news is the prices increases can't continue at this rate forever. Eventually, buyers will start balking at the prices and decide to wait longer before buying a house. And really, this is the best thing we can do.

By refusing to purchase homes at overinflated prices, the homes sit on the market longer, and sellers will have to start dropping the price to get their homes to sell.

Waiting also allows you time to save up more for a downpayment. And a larger downpayment will get you better mortgage rates, and potentially make your offer more attractive to the seller.

Is there and hope for the future?

The stats have been showing a slowdown the last few months, but the experts seem to disagree on whether a market slowdown is in our immediate future or not.

For now, it is just a wait-and-see game, all we can do is cross our fingers and hope for the best.

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A Texan and new mom, writing about things I am most passionate about; personal finance, parenting, and the events that shape Texas.

Dallas, TX

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